What’s the point of class-action lawsuits?
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What’s the point of class-action lawsuits?
Facebook’s parent company Meta reached a $725 million class-action settlement last year, allowing Facebook users who had an account at any point between May 24, 2007 and Dec. 22, 2022 to file a claim for a portion of that money.
Facebook users sued the company over allegations that it shared their data with third parties, such as Cambridge Analytica, without their consent. Users have until the end of Friday to file a claim.
While it’s unclear how much each claimant could end up getting, Money.com estimated that if every eligible Facebook user filed a claim, each person would get less than $5.
Are class-action lawsuits worth it?
In some class-action settlement cases, consumers might not receive much — potentially $5 in the case of Facebook, $10 in other cases. But having the ability to aggregate fellow consumers’ claims gives people the ability to redress corporate wrongdoing, explained Christine Bartholomew, a professor at the University at Buffalo School of Law.
“I think class actions are this kind of underappreciated tool for access to justice,” she said.
Bartholomew added there are companies that fear class-action lawsuits more than litigation against them from federal agencies.
“Antitrust is a great example. Oftentimes, the recovery in a class action will be so much bigger than it would have been from an action by the Department of Justice, or the or the [Federal Trade Commission]. And so from a business standpoint, the larger amount the money, the more likely the deterrent impact,” she explained.
Attorney Michael Reese, the managing and founding partner of the firm Reese LLP, said class-action lawsuits can lead companies to not only provide monetary compensation to consumers, but injunctive relief, in which one party must refrain from certain acts. Reese was involved in a class-action lawsuit against Wendy’s that led the fast-food chain to eliminate trans fat from its menu.
There’s a belief that class-action lawsuits don’t benefit consumers, but instead just make lawyers rich, which Cardozo Law School professor Myriam Gilles said is false. Class action lawyers aren’t making hourly wages, and have to put up the money to fund the litigation.
“It’s a consortium of class-action lawyers that decides to bring a claim and put up all that money. And the deal is that if the case is successful and it settles, those lawyers will take a percentage of the overall monetary award. So typically, that number is around 10%,” Gilles said.
Gilles said that many judges are aware of the belief that it’s the lawyers who benefit, which is why they will ask the plaintiff’s lawyers for billing records.
Bartholomew also noted that when there’s a settlement, the courts evaluate whether the intended distribution plan is equitable.
If you bring forth a case that doesn’t have merit, it will get thrown out, Reese said. “You will have spent a lot of time and money and receive nothing as the lawyers.”
This aligns the interests of the attorneys with the class members, he added.
How common are class-action lawsuits?
Nearly all class-action lawsuits are either dismissed or settled, Bartholomew said. The percentage of class-action cases that settle has actually been decreasing since around 2005, she added.
“In 2005, Congress passed the Class Action Fairness Act that moved class actions primarily from state court into federal courts. And federal courts as a whole tend to be a bit more pro-business, a bit more pro-corporate,” Bartholomew said. “As the federal courts have interpreted the procedural barriers to class actions, they’ve kind of rewritten many of these rules to make them a lot more stringent. And as a result, not as many cases get to be certified as a class action.”
But there are some industries that are seeing a rising number of lawsuits. There were more than 200 class-action lawsuits in the food and beverage industry that were filed between 2020 and 2022. In a class-action lawsuit filed against Taco Bell, the restaurant was accused of not having enough beef in its Crunchwraps.
Reese said he thinks one of the reasons for the increase is that consumers have become more knowledgeable and aware of the food they eat. He said his firm — which handles an array of different cases, including deceptive advertising — is doing at least 10 times the amount of business it was doing five years ago.
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